Playa Hotels & Resorts N.V. (PLYA): Were Hedge Funds Right About This Stock?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The following article will discuss the smart money sentiment towards Playa Hotels & Resorts N.V. (NASDAQ:PLYA).

Playa Hotels & Resorts N.V. (NASDAQ:PLYA) has experienced an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that PLYA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Parag Vora - HG Vora Capital

Parag Vora of HG Vora Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the latest hedge fund action encompassing Playa Hotels & Resorts N.V. (NASDAQ:PLYA).

How are hedge funds trading Playa Hotels & Resorts N.V. (NASDAQ:PLYA)?

At the end of the fourth quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in PLYA over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Farallon Capital held the most valuable stake in Playa Hotels & Resorts N.V. (NASDAQ:PLYA), which was worth $257.1 million at the end of the third quarter. On the second spot was HG Vora Capital Management which amassed $61.7 million worth of shares. Empyrean Capital Partners, Marlowe Partners, and Dendur Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position DG Capital Management allocated the biggest weight to Playa Hotels & Resorts N.V. (NASDAQ:PLYA), around 32.66% of its 13F portfolio. Marlowe Partners is also relatively very bullish on the stock, dishing out 16.49 percent of its 13F equity portfolio to PLYA.

With a general bullishness amongst the heavyweights, key money managers have jumped into Playa Hotels & Resorts N.V. (NASDAQ:PLYA) headfirst. Dendur Capital, managed by Malcolm Levine, established the largest position in Playa Hotels & Resorts N.V. (NASDAQ:PLYA). Dendur Capital had $23.2 million invested in the company at the end of the quarter. Dov Gertzulin’s DG Capital Management also made a $17 million investment in the stock during the quarter. The other funds with new positions in the stock are Marc Majzner’s Clearline Capital and Minhua Zhang’s Weld Capital Management.

Let’s check out hedge fund activity in other stocks similar to Playa Hotels & Resorts N.V. (NASDAQ:PLYA). These stocks are iHeartMedia, Inc. (NASDAQ:IHRT), Weis Markets, Inc. (NYSE:WMK), Abercrombie & Fitch Co. (NYSE:ANF), and HudBay Minerals Inc (NYSE:HBM). This group of stocks’ market valuations resemble PLYA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IHRT 31 221245 5
WMK 12 50262 -4
ANF 26 334232 3
HBM 11 211228 -3
Average 20 204242 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $506 million in PLYA’s case. iHeartMedia, Inc. (NASDAQ:IHRT) is the most popular stock in this table. On the other hand HudBay Minerals Inc (NYSE:HBM) is the least popular one with only 11 bullish hedge fund positions. Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately PLYA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PLYA investors were disappointed as the stock returned -73.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.